How much can a residential energy storage project actually save?

It may be surprising to know that the vast majority of California homeowners buying energy storage systems today are not doing so to save money. In other words, they are not trying to reduce their utility bill or get a return on investment, like they do from a rooftop solar system. Instead, most storage systems today are being bought and sold based on the promise of back-up power or energy independence from the utility. The primary reason for this is that the avoided cost opportunity for residential storage today is not very meaningful. On most residential utility rate schedules, energy storage does not have the ability to significantly reduce the utility bill. Therefore, it’s not the core value proposition being sold today.

Even though the economics of residential energy storage typically don’t pencil out on utility bill savings alone, many solar developers still want to know how much a project can potentially save. Shrewd developers want the ability to run this analysis, so they can identify opportunities that may make sense soon. In many cases their existing customers are asking them about storage, and what the economics of adding a system would look like. This is not just limited to the residential segment. When a customer asks about the feasibility of storage, they want the answer to be quantified. If a project “doesn’t pencil out,” they want to know the extent to which it does not make financial sense. How much savings or avoided cost could storage achieve for them? What is the payback period? What is the internal rate of return (IRR)?

Quantifying how much a project can save

Accurately estimating how much a behind-the-meter (BTM) storage project can save depends on the specifics of the project. The answer will be specific to a unique customer, their load profile, their utility rate schedule, the storage equipment being specified and a number of other project assumptions. Here’s a summary of the main variables that will dictate how much a BTM storage project can save:

Customer load profile: how much power does the customer use and at different times throughout the day?

Utility rate assumptions: what utility rate tariff is the customer on? Is it a Time-of-use (TOU) rate? Are there demand charges? Are there any NEM 2.0 assumptions to account for?

DER combinations: are we modeling a standalone storage project, pairing storage with PV, or retrofitting storage onto a meter that already has PV?

o Controls software restrictions: are there any control restrictions (requiring the battery must charge from PV, or requiring the battery does not export to the grid)

Given that there are many different variables to define, it’s hard to generalize an answer when a homeowner asks how much money they could save by adding storage. But once all of these discrete variables are defined, it’s very possible to estimate the avoided cost of a specific project. For example, a customer in the PG&E service territory, consuming 1,000 kWh per month, on the E-TOU (A) rate, pairing a Tesla Powerwall battery with their 5-kW PV system, doing a TOU arbitrage strategy, could expect to save between $X and $Y dollars annually.

Energy storage – market demand

We have roughly one-thousand organizations across the country using our software, so we talk with a lot of solar developers and installers. We can directly attest that there is strong demand from the solar development community for the ability to quantify the economics of storage projects. Last month at the Intersolar North American conference in San Francisco we had a steady stream of foot traffic for three straight days at our booth. Everyone it seems wants to talk about storage. One use-case in particular that we’re hearing a lot, is the ability to model the marginal economics of adding storage to a customer who already has solar. Another is the potential to utilize storage to preserve the savings of a solar project, now that on-peak TOU windows are moving later in the evening, which erodes the value of solar. We recently gave a presentation that touched on a lot of these topics, entitled Quantifying the avoided cost of BTM energy storage projects at a CALSEIA event which had a great turnout.

With all of the hype and buzz surrounding the energy storage market, many developers are feeling the pressure to get educated on storage and understand the value proposition on behalf of their customers. This is especially true in California, now that the Self-Generation Incentive Program (SGIP), which provides rebates for customer sited energy storage projects, has relaunched.

presentation at CALSEIA Bay Area chapter meeting, at SolarEdge Headquarters in Fremont, CA.

Energy Toolbase – storage software update

We’re a couple weeks away from going live on a big energy storage software update that we’ve been planning for over a year, and our engineering team has been building for the last several months. Our product vision is to give users the ability to objectively and transparently quantify the dollar savings for any type of BTM energy storage project. We are currently in beta and have been getting great validation from both developers and energy storage manufacturers. There is strong demand for great software tools capable of running accurate savings analysis. Even in instances where residential installers sell storage primarily based on the promise of ‘back-up power’ or ‘energy independence’, it will still be valuable to quantify what sort of utility bill savings can be achieved. Even if it’s just a secondary benefit at this point.

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Comments

The housing development community is beginning to see a place for entire housing tracts with solar PV as part of the “constructed” project. With a development of say 500 to 1,000 or more homes at build out, “community” energy storage starts to make sense in shaving energy use after the sun goes down and during the TOU rate increases after sundown.

This type of community energy storage can also become beneficial to the local electric utility also. After hours when power use drops off, very often in the 1:00AM to 5:00AM daily period, the utilities are forced to run fueled generation resources in the “spinning reserve” mode of operation. With larger community scale energy storage available, the utility can then run their power plants in a more efficient mode of operation and store that energy to use to the early morning from 6:00AM to 9:00AM time that energy demand may step up for the rest of the day.

With more alternative energy generation going online, it is important to grab as much over generation and store it for later use AND be able to use existing assets more effectively in a way that allows the asset to be used and amortized, rather than “ramped” down “until” the grid demand requires more generation.

Energy storage is generation neutral, it can take over generation from ANY source online at any time of the day or night. Running fueled generation plants in a mode that “may” over generate power to the grid, but is stored for later peak use, will allow the generation asset to sell power more of the day and less time spent not making money operating in the “spinning reserve” mode of operation.

” Our product vision is to give users the ability to objectively and transparently quantify the dollar savings for any type of BTM energy storage project.”

Just wondering if you have created some kind of storage calculator? I just started the solar process, I have three companies coming out to access and give me estimates. I’m trying to educate myself and storage is important to me since SDG&E in San Diego is finding clever ways to bill TOU and other sneaky practices.

Well, the one factor that I am looking at is the on rush of EVs. When will most people be driving these? During the day. So they will come home and plug in after peak solar and basically draw as much as a coffee pot on up to a 50 amp welder to charge the vehicle. Now it will become the biggest electrical energy “appliance” at most residential homes year around and I would think the storage will play a huge part in that equation.

It’s true most homeowners are buying battery systems today based on emotion. They like bragging to their neighbors that they will be the only one on their street with power in the event of an outage. Not sure that justifies the investment, but hey it’s their money and they can spend it however they want.